Correlation Between Eastman Kodak and Zhihu

Can any of the company-specific risk be diversified away by investing in both Eastman Kodak and Zhihu at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Eastman Kodak and Zhihu into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eastman Kodak Co and Zhihu Inc ADR, you can compare the effects of market volatilities on Eastman Kodak and Zhihu and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Eastman Kodak with a short position of Zhihu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Kodak and Zhihu.

Diversification Opportunities for Eastman Kodak and Zhihu

-0.16

Correlation Coefficient

Eastman Kodak  Zhihu

Good diversification

The 3 months correlation between Eastman and Zhihu is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Kodak Co and Zhihu Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhihu Inc ADR and Eastman Kodak is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Eastman Kodak Co are associated (or correlated) with Zhihu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhihu Inc ADR has no effect on the direction of Eastman Kodak i.e., Eastman Kodak and Zhihu go up and down completely randomly.

Pair Corralation between Eastman Kodak and Zhihu

Given the investment horizon of 90 days Eastman Kodak Co is expected to under-perform the Zhihu. But the stock apears to be less risky and, when comparing its historical volatility, Eastman Kodak Co is 1.43 times less risky than Zhihu. The stock trades about -0.02 of its potential returns per unit of risk. The Zhihu Inc ADR is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  371.00  in Zhihu Inc ADR on December 27, 2024 and sell it today you would earn a total of  112.00  from holding Zhihu Inc ADR or generate 30.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Eastman Kodak Co  vs.  Zhihu Inc ADR

Eastman Kodak

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eastman Kodak Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Eastman Kodak is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Zhihu Inc ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhihu Inc ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical indicators, Zhihu demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastman Kodak and Zhihu

The main advantage of trading using opposite Eastman Kodak and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastman Kodak position performs unexpectedly, Zhihu can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Zhihu will offset losses from the drop in Zhihu's long position.

The idea behind Eastman Kodak Co and Zhihu Inc ADR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.